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USA, McDermott Will & Emery updates

Competition & Antitrust

The International Trade Commission (ITC) has issued an opinion dismissing US Steel Corporation's antitrust claim made under Section 337 of the Tariff Act 1930 against several Chinese steel manufacturers and distributors, ruling that a complainant must show an antitrust injury even in a trade case. The case demonstrates that a complainant with a Section 337 antitrust claim before the ITC must satisfy the same antitrust pleading requirements that a plaintiff in a federal court is required to satisfy.

Corporate Tax

Declining to address whether certain technology licensing royalties should be subject to taxation as income or capital gains, the US Court of Appeals for the Third Circuit found that a patentee-taxpayer had waived his claim on appeal and affirmed the Tax Court's decision that the royalties should be treated as income. The Third Circuit acknowledged that a patentable invention may be subject to capital gains treatment even without a patent or patent application.

The New Mexico Administrative Hearings Office recently issued an opinion that addressed the following questions: under what circumstances can a state constitutionally impose tax on a domestic company's income from foreign subsidiaries, including Subpart F income; and when is factor representation required? Since many state income taxes are based on federal taxable income, inclusion of these new categories of income at the federal level could potentially result in their inclusion at the state level.

The Oregon Supreme Court has rejected a business taxpayer's constitutional challenges to a 1993 Oregon statute that eliminated the right to utilise a three-factor apportionment formula in calculating Oregon income tax. The Oregon Supreme Court joined courts in Texas, Minnesota, California and Michigan in rejecting taxpayer arguments that states which have enacted Article IV of the Multi-state Tax Compact have entered into a binding contractual obligation which may not be overridden.

Taxpayer Advocate Nina E Olson recently testified before a congressional oversight committee regarding ongoing challenges to the administration of an efficient and effective tax system. Her testimony echoes many tax professionals' concerns that the tax system is not being implemented in the most effective and efficient manner. With the advent of tax reform and the government's struggle to implement its sweeping changes, it is hoped that many of these issues will be addressed.

A shrinking Internal Revenue Service (IRS) budget has meant that fewer agents are available to make sure that the tax laws are being enforced. In 2017 the audit rate fell to its lowest levels in 15 years, with the chance of being audited falling to 0.6%. There has been movement to get the IRS more funding in the wake of tax reform, but it remains to be seen whether some of those funds will be used to increase its enforcement functions.

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The International Law Office (ILO) is a series of legal newsletters which provide expert legal commentary in the form of concise, regular news updates. ILO is written in collaboration with over 500 of the world's leading experts and covers more than 100 jurisdictions.